Senate: Package May Break Stalemate

WASHINGTON – Hopes for a compromise on an economic stimulus package dimmed Wednesday afternoon after Senate Democrats extinguished a ray of light that emerged from President Bush's weekly breakfast meeting with House and Senate leaders.

Early in the morning, Senate Majority Leader Tom Daschle, D-S.D., told Bush that he "might be able to sell something" on income tax cuts to rank-and-file Democrats if the jobless assistance portion is beefed up, according to a leadership source.

But later in the day, Sen. Kent Conrad, D-N.D., chair of the Senate Budget Committee, said that there is enough support among Democrats to filibuster any bill that includes accelerated tax cuts.

Most Democrats have sharply opposed Republican efforts to move up the effective dates of the rate cuts approved earlier this year as part of the 10-year, $1.35 trillion tax cut bill. Bush had wanted to accelerate all the rate cuts but is now proposing only to lower the 27 percent rate.

Republicans and Democrats have been bickering for months over an economic stimulus plan aimed to boost the faltering economy.

President Bush and a group of Senate centrists came to an agreement Tuesday night for a bill that would provide rebate checks for low-income earners; enhanced expense write-offs for small businesses; a 30 percent bonus depreciation on plants and equipment over three years for large businesses; accelerated reduction of the 27 percent tax rate to 26 percent; an increase of the 10 percent tax bracket to $14,000 from $7,000; permission for companies to deduct current losses from taxes paid five years ago; increased health care and unemployment insurance for displaced workers; and relief but not repeal of the corporate alternative minimum tax.

After the meeting, Sen. John Breaux, D-La., said the president's proposal could be "a basis for a compromise that hopefully a significant number of Democrats could support, with a significant number of Republicans."

After Wednesday's breakfast meeting, Daschle acknowledged that "time is running out" to overcome differences on legislation to boost the lagging economy, but said he was hopeful that the deal could get done.

Daschle warned, however, that speeding up tax cuts is "an impossibility" and instead proposed replacing the income tax cuts with a plan pushed by Sen. Pete Domenici, R-N.M., to give all workers and employers a one-month holiday from the Social Security payroll tax.

"Acceleration of rate cuts provides very little stimulus and is fiscally irresponsible... because most of the benefits occur after this year," Conrad said. "That's not what a stimulus package is about."

But Republicans said there could be no deal without the income tax cuts. Sen. Charles Grassley, R-Iowa, said 40 of the 49 Senate Republicans would not agree to a stimulus package without them.